Profit (收益) = Everything the company gets to keep from the Revenue after it pays its costs!

Present Profit v. Future Profit

Present Profit = What we are keeping right now. (Most Important)

Expected Future Profit = What we think we’ll get in the future (Companies with higher expected future profits have more value. While companies with a possibility of low future profits will have a lower value)

Profit is Counted in Two Ways

Example: Joshua has a company (Company A) that just made $150,000 in Revenue. The company spends $9,000 on Taxes and Utilities, $3,000 on Wages, and $5,000 on Raw Materials. Joshua gave the company the building but would have made $2,000 if he used it as a school instead. He also lost $5,000 on his original investment.

Economic Profit (经济利润) = Revenue – Total Economic Cost

What is Company A’s Economic Profit?

Accounting Profit (会计利润) = Revenue – Explicit Costs.

What is Company A’s Accounting Profit?

In Managerial Economics, we usually mean Accounting Profit when we say “Profit”

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[…] **Please notice that all three documents only count and discuss EXPLICIT COSTS (明确的成本). These documents are working with numbers and math, so the Explicit Costs includes only the money paid out to market-suppliers. It does not include any of the Implicit Costs like time and effort that the owner loses. Therefore, the profits we see are only ACCOUNTING PROFITS (会计利润). You can find a more detailed explanation of Costs and Profits here. […]